Oil falls towards $69 on recovery concerns

Oil fell toward $69 a barrel on Monday, extending the previous session's drop, pressured by jitters over the pace of U.S. economic recovery and easing concerns about Iran and Nigeria.

Crude fell more than 1 percent on Friday as doubts over a recovery resurfaced after data showed U.S. employers cut 263,000 jobs in September and the employment rate had soared to a 26-year high.

With U.S. macro numbers taking a turn for the worst, the path of least resistance in a variety of energy complexes will be lower over the coming weeks, said Edward Meir, analyst at MF Global.

Along with energy's uninspiring fundamentals, the complex has to also keep a wary eye on a faltering U.S. equity market and the fact that two key geopolitical props -- Iran and Nigeria -- seem to be fading in terms of importance.

U.S. crude for November slipped 79 cents to $69.16 a barrel by 1107 GMT (7:07 a.m. EDT). The contract settled down 87 cents at $69.95 a barrel on Friday. London Brent fell 87 cents to $67.20.

The dollar weakened against a basket of currencies and European equities edged higher . A weaker dollar can boost investor demand for oil and other commodities.

For now, the support on oil is coming more from the continued pressure applied on the dollar index than from the global economic data or from recent oil fundamental data points, Olivier Jakob of Petromatrix said.

We started last week with the need to price some geopolitical premium for Iran and Nigeria. We start this week with the need to take that geopolitical premium off.

REBEL DISARMS

Oil gained nearly 6 percent last week, bolstered by a surprise drop in U.S. gasoline inventories as well as tensions between major oil exporter Iran and the West over Tehran's nuclear work.

Still, prices are likely to lose some support after Iran and the U.S. described recent talks as productive and with Iran allowing United Nations inspectors into a uranium enrichment plant.

In a further easing of tension, the last prominent Nigerian militant leader agreed to halt fighting in the oil-producing Niger Delta and surrendered his weapons on Sunday.

Attention will focus later on the U.S. Institute for Supply Management services index due at 1400 GMT (10 a.m. EDT). The service sector is thought to have been on the verge of growth in September after 11 months of contraction.

Oil hit a 2009 high of $75.00 in August and has rallied 55 percent so far this year. It hit a record high above $147 in July 2008, only to collapse in the following months as the economic crisis eroded demand.

Bank of America-Merrill Lynch said in a report oil may rise above $100 next year without policy action to curb demand or an unexpected supply boost, supported by continued loose monetary policy in developed economies.